Wednesday, February 11, 2009

How to Solve Economic Crisis in 5 minutes

Recognize that the role of government is to protect individual rights including property rights by barring the initiation of physical force and repeal all laws and regulations in violation of this principle including any laws that abridge the freedom of production and trade

In accordance with this principle, restrict the federal government to the following activities:

The national defense

Enforcement of domestic criminal law

The court system to resolve disputes

Specifically, this would entail cutting all federal government departments except the following:

Law recognizes the difference between deposit contract and loan contract, i.e., irregular deposits made with banks do not constitute a de facto property transfer whereas a loan does constitute a transfer of property

Eliminate all federal taxes and replace with system of voluntary contributions and user fees for government services including fees to uphold contracts, register deeds, etc.

Auction off all federal lands (including waterways) and buildings except those needed for the above departments

Everything else left to states

I predict that the Dow would triple if not more in one day if this program were announced on CNBC. As well, all foreign currencies would plummet relative to the dollar which would force other countries to follow America's lead and go back on a gold standard.

Note that this plan would lead to widespread prosperity and happiness and does not cost any money.

All good ideas, if you can figure out some way to get them adopted and -- as importantly -- phased in over 30-100 years without backsliding.

Be realistic for a moment. Even if 90% of the population, and all the politicians, agreed, can you imagine the social and economic chaos that these sorts of sweeping changes -- ideal, to be sure -- would cause if we just woke up one morning and decided to enact them?

Or do you think that individuals and human institutions are so infinitely malleable that there would be only minor friction...

I argue this point all the time with my Republican-ish colleagues who say I'm impractical and there would be chaos, etc.

First, if even 20% of the politicians (much less 90%) believed this we would be approaching Nirvana. In other words, as the culture changes, laws will gradually change to reflect. So, I doubt in practice it would play out as if "we all woke up one morning" kind of a thing. One milestone after another will be reached.

However, because it's fun - I will answer your question directly and assume we woke up one morning and 90% are in agreement we must change to my plan.

My argument is that if my plan is morally right and the current system is morally evil then how could we continue it for another second? If the moral is the practical, then doing the moral thing must be the practical thing also. Therefore, I would change instantly.

Would there be upheaval? Yes. However, I believe the amount of of prosperity that would be forecast would create such optimism and such a sense of benevolence that private business would have such a demand for labor and capital and organizations would spring up everywhere with the goal of transitioning. We truly can not imagine the positive repercussions that would accrue from free trade, private property, no taxes, etc. It would be a bonanza that would dwarf the "problems" of temporary transition. I think we would forget about the "old system" in a month or so.

I also agree that as the culture changes, the law and politics will change accordingly, and if in the positive direction a positive spiral can be created.

But these things just flat out do not happen quickly. That, and the absence of any empirical support, makes the rest of your post fantasy. A very pleasant fantasy and one we should all work to make real. But not feasible in the manner you describe.

You can assert that the transition could be quick and still relatively painless, but you can't support it.

I don't understand how this plan translates into prosperity. I have heard the philosophy before ... That if you deregulate everything and take away taxes people and corporations will make decisions that will benefit everyone and the environment , etc.How are the infirm, mentally ill, and the elderly cared and provided for?What if the people aren't happy with the environmental practices or employment practices of a corporation? Do they have to sue everytime that happens (in the absence of regulation)?How do we properly protect our country without revenue from taxes? Who pays to maintain the national highway system - critical to the continuity of commerce?

I am no doubt naive on the topic of economics, but genuinely curious how such an approach would play out across all sectors of American life and what this America might look like as I attempt to understand the different options without a partisan filter.

I don't understand how this plan translates into prosperity. I have heard the philosophy before ... That if you deregulate everything and take away taxes people and corporations will make decisions that will benefit everyone and the environment , etc.How are the infirm, mentally ill, and the elderly cared and provided for?What if the people aren't happy with the environmental practices or employment practices of a corporation? Do they have to sue everytime that happens (in the absence of regulation)?How do we properly protect our country without revenue from taxes? Who pays to maintain the national highway system - critical to the continuity of commerce?

I am no doubt naive on the topic of economics, but genuinely curious how such an approach would play out across all sectors of American life and what this America might look like as I attempt to understand the different options without a partisan filter.

I devoted a whole post to your questions called "Anwsers to a Reader". Thanks for commenting.

Also, Jeff, I noticed in a Rand Q&A that she generally agreed with your point about change needing to take place gradually and considered it to be a gross injustice if the state were to "decontrol" overnight since so many people have made decisions based on current policy.

I do not know that I agree with her position based on my above argument but you have a smart ally on your side...her argument can be found in "Answers.. Best of Ayn Rand's Q&A" edited by Robert Mayhew.

Quote of the Month

“We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.” -- Ayn Rand